Tesla Is On Track To Become America's #1 Premium Automotive Company, Ahead Of BMW, Mercedes-Benz

Tesla Is on track to become America's #1 luxury car brand surpassing Mercedes-Benz.

Atherton Research

Correction: An earlier version of this story inaccurately concluded Tesla was the number one premium auto brand in the U.S. Tesla's 90,700 reported deliveries were global, while sales for BMW and Mercedes-Benz were for the U.S. alone. The post and headline have been corrected.

Despite legal and financial struggles, Tesla managed to cross the 2018 finishing line ahead of most of its competitors in the U.S. premium automotive market, including prestigious carmaker brands such as Lexus, Infiniti, and Acura. Mercedes-Benz and BMW are still estimated to bea few thousands of vehicles ahead of the American automaker.

Today, the Silicon Valley automaker disclosed that it delivered more than 90,000 vehicles for the last quarter of 2018—8% more than in the third quarter, which was already an all-time-high for the company—including 63,150 Model 3 (+13% from Q3), 13,500 Model S, and 14,050 Model X vehicles.

Tesla is currently neck and neck with Mercedes-Benz, the premium car division of German auto conglomerate Daimler, and BMW, based out of Munich, Germany.

Based on estimates compiled by my firm, Atherton Research, the Bavarian luxury car maker sold about 80,000 to 85,000 BMW-branded vehicles (cars and SUVs) in the final quarter of the year in the U.S.

Although Tesla doesn't publish sales figures for the U.S. or international markets alone, it's estimated that the California-based company sells between 11,000 and 13,000 vehicles outside the U.S., including Canada, Europe, and China.

And the gap between the electric car maker—which by the way also sells solar panels and clean energy storage—and its competitors is closing at lightning speed as Tesla continues to increase its production rate, expands to international markets (deliveries to Europe and China will start next month), offers a leasing option for the Model 3 and reduces the price of its vehicles (read more about it below).

In 2018, Tesla delivered more than 245,000 vehicles (145,846 Model 3 and 99,394 Model S and X), almost as many vehicles as it did in all its prior years combined.

In a statement, the Palo Alto-based carmaker confirmed that last year was also the first time in decades that an American car – the Model 3 – was the best-selling premium vehicle in the U.S. for the full year, "with U.S. sales of Model 3 roughly double those of the runner-up."

Tesla also announced that starting today, it will reduce the price of its Model S, Model X and Model 3 vehicles in the U.S. by $2,000 to partially absorb the reduction of the federal electric-vehicle (EV) tax credit, which, as of January 1st, dropped from $7,500 to $3,750.

Atherton Research's Take

Despite increasing production and sales at a breathtaking pace, Tesla has not decisively managed to beat last quarter its two most direct competitors in the U.S. market, namely BMW and Mercedes-Benz.

However, we predict that it will do so in the next coming quarters as it accelerates production and makes design updates to lower the cost of its current vehicle lineup—a remarkable milestone, for a 15-year-old company with just 3 models and no dealer network.

As Tesla ramps up production and deliveries in Europe for the Model 3, German automakers including Mercedes-Benz, BMW, Audi, and Porsche, are starting to feel intense competitive pressure in their home market as they struggle to transition their lineup to full-electric vehicles.

Indeed, despite announcing billions of dollars of investments in electric technologies over the next few years, German automakers are not expected to deliver anything that will seriously compete with Tesla's current all-electric and semi-autonomous vehicle lineup before 2020 at the earliest.

And that's before any additional price reductions and innovations Tesla could announce in the meantime.

Finally, although we believe that the $2,000 price cut that Tesla announced today will affect the bottom line of the American automaker in the current first quarter of 2019, it will also help keep demand strong.

The federal EV tax credit will drop again on July 1st, from $3,750 to $1,875. By then, we expect Tesla to release the long-promised $35,000 Model 3 base version alongside more details about its all-electric pick-up truck and the Model Y crossover, which the final prototype was approved for production last October.

Author: Jean Baptiste is Vice-President of Advanced Technologies and Principal Analyst at Atherton Research, a global strategy and intelligence consultancy in Silicon Valley.